Starbucks Business Report

Read the comprehensive business report on Starbucks, including external environment analysis, internal environment analysis, and recommendations. Get insights into the company's strengths, weaknesses, opportunities, and threats.

Starbucks Business Report

TABLE OF CONTENTS
PART 1............................................................................................................................................1
Introduction.................................................................................................................................1
External Environment analysis...................................................................................................2
Internal environment analysis.....................................................................................................7
Recommendations.....................................................................................................................11
PART 2..........................................................................................................................................12
A Presenting the list of stakeholders ........................................................................................12
B Profile of Starbuck customers...............................................................................................12
C................................................................................................................................................13
REFERENCES..............................................................................................................................14
APPENDIX ...................................................................................................................................16
A................................................................................................................................................16

PART 1
Introduction
Starbucks is a US based coffee company that is also having coffee house chain. Starbucks
corporation was founded in the year 1971 having its headquarter at Washington, US. At present
the business is operating in more than 30,000 different locations all over the world. The different
products that the business produce is coffee beverages, smoothies, tea, baked goods and also
sandwiches. There are about 291,000 trustworthy employees that are working of the
organisation. Basically, the business is the most prestigious and recognised brands for its premier
coffee brand and is also having different stores that provides its customers a stress free
environment (Mason, Cole and Goza, 2017). Company is having market share of 39.8% around
the globe.
The major competitors for coffee beverage sales are different coffee shops namely
Dunkin’s brands Inc., Mc-D etc that are offering to the customer’s premium products and
services. Starbucks is having its major competitors from US market and also in international
market. There are different quick service restaurants that are becoming tough competition for the
business and also ready to drink coffee beverage market. There are also retailers for prime retail
locations that are operating for both new and existing market and becoming competition for
Starbucks. Starbucks is having an effective competitive position in market and is fighting with its
different competitors that are Dunkin' Donuts and also McDonald's. From several years,
Starbucks is keeping its position in market as coffee king by adopting an effective marketing
approach. However, Dunkin' Donuts is also giving tough competition to Starbucks in terms of
the taste and quality. Not only this, business is also working on its pricing strategy as the cost of
Grande latte at Starbucks cost about $3.65, but Dunkin' Donuts provide the same at a cheaper
price that is about $3.29. Not only price wise but also flavour wise, Dunkin' Donuts is giving
tough competition to Starbucks. They both adopt generic strategies differently and Dunkin'
Donuts is having its major focus on low cost of its offering, while Starbucks works to make its
products differentiable.
McDonald's as a restaurant is also giving tough competition to Starbucks. But business is
getting high rank from the customers as compared with that from McDonald's and Dunkin'
Donuts. Starbucks is getting competitive advantage for its brand image as they work effectively
for their sustainable products and services. However, they are somehow lacking behind with
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respect to their pricing strategies as they are offering their products at premium prices and
McDonald's here beat them by offering the products at reasonable price for its customers.
However, customer base is quite large for Starbucks due to their focus on quality and customers
service. Starbucks is having large and differentiated product range that gives the business a
strong competitive advantage from these coffees' house and restaurants. With respect to the
working employees also, Starbucks is having an effective position and competitive advantages as
the working staff is known for their best services and creativity.
External Environment analysis
PESTLE analysis:-
It is a framework that is used by business in order to understand different macro-
environment factors and their impact on the business performance. The different macro-
environmental factors that impact Starbucks are as following:-
 Political factors:- There are different political factors that impacts the performance of
Starbucks like government policies, foreign trade policies, labour law etc. There are
different countries from which Starbucks buy its raw material and these countries are
having different policies and regulations that directly impact the business. Bureaucratic
red tape in different countries also impact the decision making of Starbucks and also
makes the business expansion more difficult for its business. However, regional
integration of markets brings opportunity for the business so that they can expand its
business globally and government of US is providing full support for infrastructure
development that helps the business to reach its potential market (Rastogi and Trivedi,
2016).
 Economic factors: - There are different economic factors like inflation rate, interest rates
and exchange rates etc. that impact the Starbucks. With the high economic growth and
employment opportunity to all developing countries, Starbucks gain more revenues from
different markets. However, business is also getting impacted with rise in labour cost as it
increases the business spending. Economic factors are directly associated with the
purchasing power of customers. Hence, in the case of having undesirable economic
condition Starbucks would not become able to attract more sales and profit.
 Social factors:- There are different social factors like norms, customs, lifestyle, health
and safety etc. that Impacts the business. With the growth in culture of coffee, Starbucks
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is having a great opportunity in hand to increase their revenue. Business also have
opportunity to make their customers attracted with the help of different healthful products
as lifestyle of people are changing (Islam and Mamun, 2017).
 Technological factors: - There are different technological factors like innovation,
automation etc. that impacts the business activities and performance. With the rise in
technology, customers are switching towards online delivery. Starbucks is having
opportunity to enhance their mobile apps and have effective online sales as it helps the
business to have more revenue in hand. However, with the raise in technology
advancements, there are many people who purchase coffee machines for their home and
this have become substitutes for products that Starbucks produces.
 Legal factors: - There are different legal factors like employment laws, consumer
protection law etc. that impacts the business. Government have initiated product safety
regulations that gives opportunity to Starbucks in improving their performance by having
ingredients from GMO. However, with the increase in employment regulations at US
have threatened the business to have access to labour market and have also raised by
spending of Starbucks on these human resources (Perera, 2017). Environmental factors: - There are different environmental factors that impacts the
business like raw material, pollutions, carbon footprints, climate etc. With the increase in
sustainability trends, Starbucks will be getting a great opportunity by ensuring the
minimum environmental impact of its business on surrounding. However, in order to
adopt these trends, business will be required to invest in huge amount for having
recycling instruments at workplace (Fozer and et.al., 2017).
5 Force analysis:-
Porter's five force analysis is an effective tool that is used by the business in order to
analyse level of competition within the industry in which Starbucks operates. The five forces are
as following:-
 Threat of new entrant: - The threat of new entrant is somehow moderate for Starbucks
due to its brand image in market. If any new entrant starts investing in this filed, the
barriers are not that much high. At local level, new entrants can easily compete with
Starbucks by offering quality products and services to the customers at lower or
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affordable prices. With an effective brand image, market share and also loyalty of its
customers, Starbucks is having less impact of new entrants (Obeng and et.al., 2016).
 Threats of substitutes:- In the context of Starbucks threats from substitute products are
higher. Moreover, aspects pertaining to the availability and affordability of substitutes are
higher. In addition to this, switching cost is lower which in turn imposes high threat in
front of the company.
 Bargaining power of buyers:- The bargaining power of the buyers is high to the
significant level (Kitamura, Matsushim and Sato, 2017). Moreover, high level of
customer sensitivity takes place in the coffee chain industry pertaining to pricing aspects.
Further, buyers also have detailed information about products or services offered in this
industry so power of buyers can said to be higher.
 Bargaining power of suppliers:- Suppliers are having low to moderate pressure on
Starbucks as it is having its own supplier diversity policy with the help of which business
selects the potential suppliers. Company is having an effective relationship with the
farmers directly and is having an effective supply chain management that helps the
business to reduce bargaining power of its suppliers.
 Competitive rivalry:- Competitive rivalry is somehow moderate to high in case of
Starbucks and the reason is that business is having monopolistic competition within the
industry. It is having high market share and that makes the competitive rivalry moderate
for its business. With the premium quality and differentiable products in market,
Starbucks is able to compete with all its rivalries. However, the businesses that are
competing for the respective market share is quite high. That is the reason, competitive
rivalry for its business is between moderate to high.
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Figure 1: Competitors analysis
(Source: Starbucks Porter’s Five Forces Analysis, 2019)
Industry life cycle model:-
This model consists of various stages where the company starts operating, getting
progress, prospects and then slump. There are five stages that life cycle model consist of and
these stages are as following: -
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Figure:- 1
 Start-up stage: - At initial level, the demand of the customers is quite limited as they are
not aware about the features that the new product have. During the start-up stage of
Starbucks, customers were not aware about its offerings and the quality of products that
they provide. At this, the distribution channels of Starbucks were not developed enough
and that was the reason it was having only few product supply. The promotional activities
were also underdeveloped and that resulted in generating low revenue for Starbucks
(Zhang and et.al., 2016).
 Growth stage: In the next stage, Starbucks started attracting bigger market segments and
the profitability of its business started rising. They worked effectively to improve the
features of its products and the value of its products in eyes of the customers started
growing. With the increase in demand of its offerings, the price associated with the
products started going down in order to increase more demand.
 Shakeout stage:- Here, businesses are generally eliminated as they are unable to have
any position in market and that also leads to negative cash flow of the business. However,
6
Illustration 1: Industry life cycle model
Source: (Industry life cycle, 2019)

Starbucks do not face this stage, due to its effective market position and having loyal
customers.
 Maturity stage:- At maturity level, the organisation become well established and also
reaches to its saturation stage. They adopt different strategies in order to protect their firm
and in bringing business profitability. At present, Starbucks is at the maturity stage where
it is having an effective position in market and demand of the customers is also high
enough.
 Decline stage:- Finally, growth, success, sales and profitability of an organization starts
decreasing due to the saturation level of industry. If the business is having believe that
there is no opportunity left, they decide for selling off subsidiary business interests or
investments (Iritani and et.al., 2015).
Internal environment analysis
In context of undertaking the matter related to Starbucks, it is determined through
conducting the SWOT analysis:
 Strength: In respect of undertaking the matter from the data of 2019, it is examined that
Starbucks are carrying the renowned grand image in market. As customer are attracted
towards the logo and sign which Starbucks is putting on their products. This is one of the
major strength which is undertaken by the Starbucks company in respect of carrying the
strong brand name in market (Jones and Comfort, 2018). The another strength which is
examined is relating to using the premium coffee beans which is rarely available in
market and also it is different from the Arabic beans which is mainly used by coffee
shops. Thus, to provide the quality taste to customer they mainly use the innovative ideas
to present the coffees with carrying the mix taste of the crush beans. Thus, through this
aspects they attract the customer towards offering the high rated quality coffee to
customers.
It is also examined that they mainly carry the global presence in market as they sell their
products in across 75 countries as it is find in the latest survey report. They maintain the
customer’s loyalty by providing the premium rated quality products to customers. In 2019 report,
it is also examined that they are financially strong from the previous times and also undertake
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various methods to build strong base of customer in market (Abdel-Basset, Mohamed and
Smarandache, 2018).
 Weakness: It is examined that, Starbucks focus less on marketing in comparison to other
coffee brands. As the facts which is undertaken is relating to carrying less deal with the
activities which are promoting the business and attracting customer. As Starbucks are not
spending more in such perspective. The another weakness is examined is relating to
carrying the premium pricing procedure (Nan and Li, 2017). As Starbucks are charging
high prices on products which they are providing to customers and it is examined that
most of the customer are preferring the different coffee brands. Middle class people
cannot afford the coffee of Starbucks on regular bases. It also related to undertaking the
high cost spend on operating function as the expenses are increased as 18.6 billion dollars
in 2017 as comparison to 17.5 billion dollars.
 Opportunities: Due to changes in time, most of the companies are using the digital
media platform to build strong base of customer through online marketing of products.
Thus, in respect of Starbucks they use the AI and digital technology to examine the latest
things which is adapted by audience and then design such products accordingly (Arrigo,
2018). It is examined that Asian market are considered to be one of the fastest growing
market in world, thus Starbucks main focus is to expand the business in Chinese market
to attract the customer towards the innovative services. The opportunity is also raised for
Starbucks in respect of choosing the partnership business or acquired the small business
into their brand name.
 Threats: The threats of Starbucks is examined lot of competitors enter into the market
regarding serving the coffee with nominal prices. The threats also raised in respect of
growing the business in different countries and by this factors, the operational cost is also
increasing. It is increased in respect of recruiting more labour to accomplish such task
and also promote the business globally (London, 2019). As it is identified that the
operational cost of the Starbucks are increased to 83% which is more higher than its net
revenue. Thus, in such aspects it is difficult to alter the menu of the Starbucks as they use
less marketing procedure to promote their products at global level.
Thus, through this aspects, they can easily beat the competitor’s strategy which
promoting the same products through using the innovative method to attract the customer interest
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towards such services for longer way. In context of undertaking the matter related to conducting
the value chain analysis, it is examined that it is conducted to determine the value and business
strategy of the competitors regarding promoting the products. It carries five stages to analysis the
value chain of Starbucks such as:
11 Inbound logistics: In this the values is to be determined in respect of maintaining the
close relationship with the suppliers (Sholihah and et.al., 2016). By this aspects, they
deal in continuous supply of the coffee which helps in accomplishing timely delivery of
order for the customers.11 Operations: Starbucks use the different procedure to prepare coffee, as before making the
coffee they roast the Arabic coffee previously and then prepare such coffee. The main
aspects of conducting their procedure is that they can spread the fragrance of the coffee
to the customer who are availing it.11 Outbound logistics: They mainly sell the products to the customer through physical
stores which is licensed and also approved from the government (Epstein, 2018). They
also deal in selling their products through online sources which build the strong base
with customers.11 Marketing and sales: In this perspective, Starbucks uses the social media platform to
reach to large customers and through this aspect they not focused more on traditional
methods. Through this aspects, the sales also increased by recruiting the skilled person to
handle the queries in better way.11 Service: The services which is provided by Starbucks is majorly focus on serving the
customer with best quality products. As the ingredients such ass coffee beans which is
used in the preparing the coffee is rarely found and thus it retain the customer interest at
larger level (Kaplan, 2018).
In context of conducting the VRIO of Starbucks , it is stated as follows:
Factors Value Rare Inimitable Organized
Renowned brand
image
Its true, that they
carry the
renowned brand
image in market.
As customer are
Not very rare, as
they also attract
the competitors
regarding
promoting the
Yes, As this
products is
difficult to change
but carry the
sustainability in
Yes, they are well
organised and
undertaken in
better way. As
Starbucks carry
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attracted towards
the logo of the
Starbucks
same products
(Sisson and
Bowen, 2017).
market for longer
time period
their own farm
from where they
produce the
coffee beans
which is rarely
found. Thus they
are well organised
and planned to
carry the
activities.
Customer loyalty Yes, they
maintain
customer loyalty
through providing
quality products.
Not so as other
firms also use the
same strategy to
attract the
customer.
Yes, Its difficult
to imitate
customer.
Yes, they
organise the
customer interest
through providing
innovation in the
taste of the
coffee.
Presence of
business globally
Yes, it is
necessary to
retain the
customer interest
towards such
services (Nguyen
and Rugman,
2015).
Yes, It is difficult
in respect of
sustaining the
financial
investment in
right manner.
Yes, its difficult
to imitate the
Starbucks
business as due to
financial
perspective
Yes, by this
perspective, it
helps Starbucks to
generate more
revenue
Recommendations
Starbucks is required to focus on setting and achieving SMART objectives as it helps the
business to improve performance of the organisation. The simple process that firm needs to have
in its practices in order to improve performance in next three years are as following:-
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 Specific: - Business organization should set their business goals in such manner that the
goals are easy to understand and are clear in mind of the working employees. Company is
required to make their employees specific about the different business objectives so that
they can work effectively in order to achieve the same. Business is required to set a
specific timeline that these employees are required to follow in order to achieve their
business goals on time. The better is the description of the expectation that business is
having from its employees, the greater are the chances that the potential employees will
success. In order to attract more customers and sales Starbucks should lay more emphasis
on undertaking promotional activities. By this, firm would become able to develop
awareness among the customer’s regarding offers and wide range of choices offered by it.
 Measurable:- The goals set by the concerned coffee chain is to be measurable and for
the same they are required to break these goals into smaller parts as it become easy to
identify achievable goals and unachievable goals. This helps the business to have
quantifiable results in hand and for the same starting metric is required to be defined in
order to meet the expected end metric. Business is also required to distribute the goals on
bases of the knowledge and skills that employees have as it helps the employees work
effectively for those tasks that they are having understand of. By doing comparison of
current sales output as well as customer base in against to previous and standards firm
can measure progress.
 Attainable:- The business goals of restaurant chain must be attainable. For the same
specific resources and team have to be allocated by the business. Business is required to
allocate a specific budget for the goals that are needed to be achieved and also skilled
employees that are having some knowledge and experience in the same field. Goals that
are impossible to achieve are demotivating for the employees, so business is required to
provide right goals and right resources in hand of the employees. By giving
advertisements on Facebook, Twitter, Instagram firm can attract more customers resides
at global level.
 Results focused:- The activities are never been focused, but the outcomes are always
measured while setting the goals for the business. Starbucks is required to set goals that
tie the responsibilities of working employees directly to the mission of the business.
Managers are also required to evaluate the performance of employee’s time to time and
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reward them for their good performance. It is very important for the business to recognise
the individual and team performance so that specific training can be given to them in
order to improve their skills and knowledge so that they can work effectively in order to
achieve the goals. Goal pertaining to enhancement of customer based and sales are
realistic in nature because customer at global level can be targeted or attracted via social
media marketing strategy.
 Time bound: - By undertaking intense promotional campaign for the period of 3 months
Starbucks can increase customer base.
PART 2
A Presenting the list of stakeholders
A. Mentioned in appendix
B Profile of Starbuck customers
Starbucks is one of the fastest growing coffee chain in the USA. Currently, it is operating
in the multiple nations of the world. Customer base of Starbuck is wide and have unique
characteristics. Starbuck target affluent people who want to spend more and have good lifestyle.
Professionals are also target audience of Starbuck as they prefer to visit coffee shops for
meetings and other purpose. It can be observed that Starbucks stores are often located in areas
where affluent people have their homes. Now a days Starbucks is also opening its chains in the
areas where middle class people live. This is because middle class people have moderate income
but many times they prefer to spend high on premium products. Starbucks target those who are
in age of 20 to 40. This is because this age group cover both young and professional individuals.
This is the overall demographic profile of the Starbucks customers group.
From last three years customers as stakeholder are one of the priority groups for the
business firm. This is because many new competitors of Starbucks appear in multiple nations.
These competitors are Café coffee day, Costa coffee and Dunkin Donuts etc. In specific nation
like India Café coffee day is gaining huge popularity and giving tough competition to the
Starbucks. Hence, now some days it become difficult for Starbucks to create and retain
customers in the business because already there are number of alternatives available in the
market. Hence, from past three years Starbucks is focusing on its customer base as priority
stakeholder group. Starbucks customers growth rate is not so high which is one of the major
matter of concern for the firm because earlier those who visit Starbucks now also are taking
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services from its rivals. Thus, it can be said that condition for the Starbucks is critical. However,
Starbucks is following aggressive strategy in its business and under this it is increasing its
franchisee at fast rate so that more and more people can be covered. Starbucks understand its
customers’ needs and accordingly is refining its products and services in the market.
C.
Mendelow’s matrix is used to evaluate stakeholders in the business. As per this model if any
stakeholders level of interest is low and power is low then minimum effort must be made. If any
stakeholder has less power and high level of interest then it must be keep informed about the
company business activity. If any stakeholder has high power and low level of interest then in
that case stakeholder must be kept satisfied. On other hand, if any stakeholder has high power
and high interest then they must be considered key players. In present case customers must be
treated as key player because they generate revenue for the business and also, they have high
interest in the business. If Starbucks will be failed to fulfil needs of the customers then they will
go to the competitor’s store which will lead to decline in business revenue. Hence, it can be said
that level of interest and power of customers is high in the Starbucks business. As part of
communication strategy through FB Starbucks must advertise its offers and product speciality
which will make audience believe that firm is capable to fulfil their needs.
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REFERENCES
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energy in the light of PESTLE & SWOT analyses for island countries. In Smart Energy
Grid Design for Island Countries (pp. 1-19). Springer, Cham.
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London, T., 2019. The Role of Values in the Creation and Maintenance of an Organization’s
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MANAGEMENT IN THE COFFEE INDUSTRY. Journal of International Management
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Perera, R., 2017. The PESTLE analysis. Nerdynaut.
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Rastogi, N.I.T.A.N.K. and Trivedi, M.K., 2016. PESTLE technique–a tool to identify external
risks in construction projects. International Research Journal of Engineering and
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Online
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APPENDIX
A.
Stakeholder group Internal or external Justification for including
them in list
Employees Internal They give their hard
contribution for achieve
goals and objectives of
company in an effective
manner
Investors External They provide capital to the
company and due to this
reason their concerns must
be addressed in proper
manner.
Customers: External They affect company
performance directly and if
they reduce consumption of
Starbucks product profit of
the firm decline.
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